Bernard Hickey: Vote buying's hidden cost

Politicians are flinging so much cash at us that we need calculators to keep track

A month into this election year, three of the main political parties have promised to spend $1b to appeal to one bloc of voters or another. Photos / APN

Like the past six elections under MMP, the seventh this year is shaping up as a contest between parties promising to give government money back to the voting bloc they think they need to win.

A month into this election year, three of the main political parties have promised to spend $1 billion on payments to appeal to one bloc of voters or another.

Labour's Best Start plan for a baby bonus, extended parental leave and early childhood education would cost $566 million a year by 2020/21.

The Greens' plan for community hubs at low-decile schools would cost $115.1 million a year.

National's plan was more targeted, offering to spend up to $359 million over four years on big new pay packets for more than 6,000 teachers, who are not typical National voters.

Voters from different demographics will be offered all sorts of deals to win their support. The words "bribe" and "middle-class welfare" have already been bandied around.

So what are voters to do with this smorgasbord of tempting treats, most of which is their own money being directed back to them? It will pay to read the fine print and get out a calculator for some heavy number crunching.

The devil is always in the detail.

The detail published with Labour's plan showed those on the parental leave that Labour hopes to extend won't be eligible for the baby bonus. The bonus also drops in the second or third years as incomes rise over $50,000.

Then there's the unintended consequences of these policies that could hit the same or other voters in the pocket.

One of the complaints about Working For Families and interest-free student loans was that they enabled canny home owners on higher incomes to gear up into even bigger mortgages, helping to further inflate Auckland's housing bubble.

The other complaint was that a loosening of fiscal policy by the Labour government between 2005 and 2008 forced the Reserve Bank to put up interest rates by more than it otherwise would have.

The National Government is already waving the stick of higher interest rates over Labour's head.

But Key has also indicated his Government could loosen the purse-strings to extend parental leave.

So the juicy starter of a baby bonus or a higher expert teacher salary or a tax cut or extended parental leave could be followed by higher interest rates and house prices that wipe out the benefit.

The danger with these policies is that they layer giveaway and tax credit upon tax credit and giveaway, creating an almighty mess of policies for some poor bureaucrat to administer.

It's a pity MMP has driven politicians into these corners where they feel all they need to do is buy off a crucial 1.5 per cent of the vote to break the coalition logjam and return or cling to power.

Even a change of government seems unable to unravel the gimmes created by predecessors. Prime Minister John Key once called Working For Families "communism by stealth", but he has stuck with it for seven years and no one expects him to take the electoral risk of dropping it.

It all makes a more holistic plan such as Gareth Morgan's "Big Kahuna" seem attractive. A simple unconditional basic income and a single income tax rate of 30 per cent that also taxes income from capital, including land and buildings, would untangle this multi-layered mess of a benefit and tax system that has developed under MMP.

Such a big idea or reform is anathema to MMP politicians and voters.

So the only alternative is to get a big calculator and use it heaps between now and the election.

Perhaps the Electoral Commission should be offering training in how to use a spreadsheet as well as encouraging people to enroll.

Bernard Hickey is the publisher of Hive News, a Wellington-based political and economic subscription news email service. He also writes for Interest.co.nz and appears regularly on Radio New Zealand, Radio Live, TVNZ and TV3. He has been a financial journalist for 25 years, having worked for Reuters, the Financial Times Group and Fairfax Media.